Sale of property means transferring the title in the property for a sale consideration. The seller transfers the ownership rights in the property to the buyer.
A sale deed is the primary legal document which evidences the sale of a property. The sale transaction is complete when the sale deed is executed and registered as per law. When the property is purchased through General Power of Attorney, the title over the property is not complete until the sale is duly registered.
What is a power of attorney?
Power of Attorney is an authorization in writing given by a person (grantor/ donor/principal) to another person (attorney/agent) to act on his behalf. Principal confers authority on his agent to perform specified acts on his behalf.
Read More: Checklist for selling property in India
PoA can be general or special. When power is granted for a particular task or limited purpose, it is special PoA.
The General Power of Attorney is not specific. It contains broad authorization to perform a variety of tasks. It can be given to finalize the terms of the sale and to sign the deed on behalf of the buyer/seller.
Selling a property through GPA.
In sale through GPA, the seller executes an agreement to sell vide which he confirms the receipt of payment and delivers the possession to the buyer.
- Power of attorney is not a sale deed. It is merely an authorization. It is not a document conferring any title in the property. Nor any right or interest in the property is transferred to another person.
- If the property has been purchased through Power of Attorney, the title is not complete. The purchaser is not the owner legally. There has to be registered sale deed in existence for completing the transaction.
Sale of property by NRIs using General Power of Attorney
NRIs generally issue power of attorney to their Indian relatives, friends or family members. They cannot be present physically in India for all transactions.
In case of transfer of property by sale, an NRI must mention the reason for issuing the PoA. It must contain the relation of the NRI with the agent. The instrument authorizes the execution and registration of the sale deed to complete the sale transaction. The document itself is not a sale deed.
Why people use GPA to sell the property
- People use it for sale of the property to evade stamp duty and registration fees.
- General Power of Attorney is used to sell a property even if the title of the seller is not clear.
- In the case of agriculture land, if the property is to be sold for residential purpose, it has to be converted. The landowners sell this land using GPA without conversion.
- To avoid payment of tax on capital gains earned on transfers.
- In the case of flats which are allotted on a leasehold basis, sale of flat is permissible only after the expiry of a specified period. Thus the transfer of unit through GPA is widespread as it is done before expiry of such period.
Do it the proper way:
All transactions through Power of Attorney holders are not wrong in law. Genuine transactions are permitted. POA is used to carry out the assigned tasks.
In a sale transaction, the title gets transferred to the buyer only if the sale deed is executed and registered as per law. Registered sale deed ensures verification of the title and prevents dubious transactions.
General Power of Attorney is not a substitute for sale deed.